Malaysia’s Axiata Group Bhd, the biggest shareholder in M1 Ltd, is likely to reject an offer that valued the Singapore mobile operator at up to S$1.9 billion ($1.4 billion), a source with direct knowledge of the matter said.
Axiata is in talks to team up with private equity firms and other companies as it considers options to launch its own offer for a bigger stake in M1, said the source, who was not authorised to speak about the matter.
Axiata, which has a 28.3 percent stake in M1, views the Keppel-led offer of S$2.06 per M1 share as “opportunistic” and “inadequate”, the source said.
Singapore conglomerate Keppel Corp and Singapore Press Holdings (SPH) are offering to buy the remaining shares they don’t own in M1, in a deal worth up to about S$1.27 billion ($930 million).
Keppel and SPH are offering a 26 percent premium to M1’s last closing share price of S$1.63 on Friday.
The offer comes as M1 shares are down nearly 60 percent from an all-time high of S$3.99 in early 2015. Keppel and SPH together hold a 33.27 percent stake in M1, which has struggled to boost revenue and tackle a fall in profit.
Analysts see M1 as the most vulnerable in a competitive Singapore mobile market, where Australia’s TPG Telecom is set to become the fourth mobile operator.
The city-state of 5.6 million people has just over eight million mobile subscriptions.
ACCURATE FUTURE VALUE
Axiata said in a statement it was evaluating all its options and it suggested that the Keppel-led offer price was not satisfactory.
“The company has been clear in our position that the Offer should reflect the accurate future value of M1 (inclusive of an acceptable control premium), consistent with market standards,” Axiata said.
Axiata said it will consider factors such as M1’s “depressed” share price for more than a year versus its “true value potential, long-term growth potential, and future competitive outlook.”
Daiwa Capital Markets said Axiata was unlikely to agree to the offer and the Malaysian firm had adequate resources to engage in a bidding war of up to S$2.50 per share.
“We view the current offer as highly opportunistic and perhaps driven by financial rather than strategic considerations,” analyst Ramakrishna Maruvada said in a report.
The deal would allow the Keppel-led group to gain majority control of M1 after the mobile operator’s three major shareholders ended a strategic review of their stakes last year.
Sources said the review was shelved after a lower-than-expected offer from external parties.
KCL and SPH said on Thursday they would aim to stem the decline in M1’s shares through a “combination of transformational efforts which are expected to take several years.” They did not give details of their plans.
The offer is subject to conditions, including approval from Singapore’s Info-communications Media Development Authority on or before March 27, 2019.
Separately, Keppel said it was seeking to privatise Keppel T&T for S$1.91 per share, a 40 percent premium to the last closing price. It already owns a 79.22 stake in Keppel T&T, which provides logistics and data centre services.
Trading in shares of Keppel, Keppel T&T, SPH and M1 remained on a trading halt.
DBS is the financial adviser to Keppel, while Credit Suisse is advising SPH.